Overnight Chinese markets dropped some 7%, after news that Chinese manufacturing contracted for a 10th straight month.
Some analysts now suggest China – who reportedly contributes between 0.5% to 1% of global GDP – will now drive a global recession in starting in Q2 2016.
Ok, that has looked to me to be the case for a while as the global economy has been slowing for several years. But why might Chinese share prices have dropped so precipitously? One possible explanation (that I personally favour) is heavy handed government intervention during previous sell-offs. The chart below shows the Shanghai markets over the past year. Specifically of interest is the sharp drop of some 32%, from a high on June 5th to July 8th, when regulators banned “large” investors from selling for six months, suggesting they “would deal severely “ with transgressors.
And that ban expires January 8th. Some expect as much as
Markets always find a way. And heavy handed government manipulation always backfires.
Oh well, at least in America’s free markets, we have The Plunge Protection Team, who are very, very active in supporting — whoops! stablising, yes stablising the markets.
Ha ha ha, you say tomayto I say tomawto.
Could get exciting.
